Today’s announcement by the UK’s Institute of Cancer Research that a drug it discovered, abiraterone acetate, demonstrated impressive phase I data in treating aggressive and drug-resistant prostate cancer, has provided a fillip to the two companies subsequently involved in the product’s clinical development.

Shares in UK specialty company BTG, which originally acquired all rights to the drug, jumped as much as 15% to 192p, a new two-year high. Meanwhile, the news is also helping Cougar Biotechnology, to whom BTG licensed on all rights in 2004, continue its recovery since a significant investor sell-off in March caused its shares to plummet 33% in four days; understandable profit-taking given the US company’s stock was one of the industry’s best performers in 2007 – see EP Vantage:  Prostate cancer results power Cougar Biotech's shares, November 28, 2007. 

Since touching a record low of $17.15 in March, shares are now trading at around $29, much closer to their $31 listing price on the Nasdaq exchange in December, following their conversion from the OTC Bulletin Board.

Adding weight

The results of the UK trial, showing significant prostate tumour shrinkage and dramatic falls in PSA levels in 70-80% of patients, adds to a so far impressive set of phase I and II data for abiraterone, referred to as CB-7640 by Cougar.

Cougar already reported encouraging early clinical data at this year’s ASCO conference, in patients with hormone  refractory prostate cancer (HRPC), in both chemotherapy naïve and chemotherapy refractory settings.

Indeed, the California-based group was one of the companies to benefit the most from the oncology extravaganza, seeing its shares rise 14% over the week of the conference – see EP Vantage analysis: ASCO EventAnalyzer - 2008's winners and losers, June 6, 2008.

On the back of the clinical data revealed so far, Cougar initiated its first phase III trial in April, in 1,160 patients with  HRPC who have failed docetaxel-based chemotherapy. The primary endpoint for this trial is overall survival and top-line data may be available by late 2009 or early in 2010. A second trial in chemotherapy-naïve  HRPC patients is expected to start by the end of the year.

Commercial strategy

So far, Cougar has maintained a fairly open mind as to how the company intends to commercialise the drug, assuming phase III trials are positive and it gets the green light from the FDA.

However, a clue as to the most-likely strategy is provided by the group’s overall business model. Instead of ploughing money into inherently risky drug discovery research, Cougar has opted to in-license products with tangible pre-clinical or early clinical data. Although they may pay a slight premium for this, the company believes it is worth it in terms of being able to assess a candidate’s safety and efficacy potential before deciding to make their investment. Once a product has been in-licensed, Cougar then out-licenses all clinical development to third party contract research organisations.

As such, the company, with a respectable market capitalisation of $583m, is able to employ a relatively small workforce of just 26 full-time employees. This strategy therefore suggests that Cougar will prefer to seek a commercialisation partner than attempt to go it alone, with all the costly changes in infrastructure that would entail.

However, given the number of promising prostate cancer drugs that have failed in large-scale phase III trials, such as GPC Biotech’s satraplatin last year, it could mean any partner may prefer to wait in the wings until the initial phase III data is released in 18 months time.

Conversely, a positive read out of the late stage trials would propel the company’s valuation significantly higher and raise the price of any licensing deal. The drug’s potential is highlighted by its current consensus net present value of $786m, according to EvaluatePharma’s NPV Analyzer.

Either way, assuming successful development, BTG will continue to benefit through annual license fees, milestones and royalties, regardless of whether Cougar out-licenses commercialisation rights.  

More cash required

Despite a relatively healthy cash balance of $124m as of the end of March, the expensive phase III trials are expected to rapidly burn most of these reserves, such that additional funding will be required by the end of next year.

Although Cougar's shares have recovered to respectable levels in recent months meaning a share issue is certainly an option, the company and its key shareholders may be tempted to hang on for a juicy licensing deal upon positive clinical data, to prevent further dilution of shareholder value.